Anna Stonehouse/The Aspen Times
The financially distressed Aspen Club & Spa is getting a $4 million injection to retain any chance of being redeveloped into a luxury fitness and wellness center and fractional town-home project owner its current ownership.
U.S. Bankruptcy Judge Joseph G. Rosania Jr. ruled Thursday the club can obtain the financing to keep its business afloat while it tries to reorganize its debts, devise a plan to emerge from bankruptcy, settle more than $25 million in debts to contractors and $50 million to other creditors. Construction work on the residential and commercial development project has been dormant since the fall of 2017.
“I understand that there’s a lot of anxiety and angst that exists in this case,” the judge said, “since construction has been stopped for a long time, about a year and a half.”
Rosania Jr. had the option of selecting either EFO Financial or GPIF Aspen Club to provide the interim financing. Or he could have ruled against any interim financing, which would have spelled the end for the club’s redevelopment under its current ownership, led by Aspen resident Michael Fox, while leaving the creditors little to show.
The judge went with Florida-based EFO Financial Group, which will provide $4.05 million to the club. It originally had an offer of $6.75 million, but Aspen Club attorneys reduced that amount after attorneys for five secured creditors — Gould Construction ($1.7 million), Ludvik Electric Co., PCL Construction Services ($18.8 million), Revere High Yield Fund ($12.2 million) and GPIF Aspen Club ($34 million) — mounted pushback.
Creditor GPIF Aspen Club Redevelopment, which The Aspen Club owes the most, also tried to provide interim financing by submitting an offer Tuesday, but the amount did not cover the more than $325,000 owed for Pitkin County property taxes as well as dues to the neighborhood homeowners association.
Aspen Club attorneys as well as Michael Fox, the company president, said GPIF was trying to provide financing through what they referred to as “loan to own” tactics using aggressive contractual terms to force the club into default so it could take over the property. Club attorney John Young said GPIF also is looking out for its bottom line only, with no concerns about the construction firms owed cash.
“GPIF doesn’t care about any of the creditors behind them,” he said.
Jason Cohen, counsel for GPIF Aspen Club, said that’s not the lender’s endgame, as evidenced by its withdrawing its foreclosure action on the property in March. He also took a dig at Fox.
“There’s no way GPIF would ask these men and women to work and not got paid … that’s what Mr. Fox did,” he said, adding “there’s just no truth that we want to own this property. We don’t want to own this property. They just want to get paid off.”
GPIF Aspen Club, which is affiliated with Dallas investor Jeff Goff’s GP Invitation Funds, acquired a loan note from FirstBank in December 2017. GPIF is associated with companies that own the Canyon Ranch luxury resorts in Tucson, Arizona, and Lenox, Massachusetts, and the Brown Palace hotel in Denver.
FirstBank originally had agreed to provide The Aspen Club a loan of $45 million, but withdrew a $15 million installment in the summer of 2017, forcing the club to stop construction that fall, Fox testified Wednesday.
The judge noted that his decision to allow interim financing was based in part because the club is behind in property taxes to the county, and it also is behind on its neighborhood homeowners association dues. His decision came after an evidentiary hearing held most of Wednesday in Denver.
“We all agree, I think, the proposed financing is an exercise in sound business judgment, because all parties agree the property is in immediate need of preservation,” Rosania Jr. said. “The only other financing available is from GPIF. The court finds that GPIF’s offer is inferior on a number of bases.
“First, it does not include payment of real property taxes to the county or its HOA dues. And respectfully, as a judge sitting in the district of Colorado, it’s extremely important to me to see the real property taxes and HOA dues be paid. The amounts really are quite nominal in the larger scheme of things. And if we’re going to turn this project around and get it off the ground and pursue the plan on any bases, first they need to be paid.”
Testimony also included remarks from appraiser Christopher Donaldson, who said Wednesday the Aspen Club land is worth $43 million and will have a build-out value of $200 million, should the project ever get completed.
The judge also leaned on Donaldson’s testimony to make his decision.
Work on the project — including a remodel of the 40,000-square-foot Aspen Club & Spa building, the construction of a 54,000-square-foot lodge with 20 timeshares, and 12 multi-family affordable-housing units — came to a near halt in August 2017 when subcontractors abandoned the site because they were owed money for labor and materials.
Mark Gould, CEO and CFO of Gould Construction out of Glenwood Springs, said his firm’s work is done.
“We’re not going back to work for Michael Fox,” he testified.
The judge also touched on the impacts on the community.
“I’m sensitive to that group of creditors, of course, because … when contractors and subcontractors don’t get paid, it causes a ripple effect on the economy where now the contractors can’t pay their employees, and their employees can’t pay their bills, and unfortunately, some of that has probably happened here.”
Fox said he still wants to complete the project.
“I believe completing the project creates a much higher return for the creditors,” Fox testified.
Rosania Jr. currently is overseeing the joint administration of two bankruptcy cases — The Aspen Club & Spa LLC declared Chapter 11 on May 16 and Aspen Club Redevelopment LLC made a near identical filing May 17 in the U.S. Bankruptcy Court for the District of Colorado in Denver. A trustee has not yet been appointed to the case.